Cash management is an integral part of any business. In order to ensure financial stability, a company must effectively keep track of its various cash inflows and outflows. Failing to do so jeopardizes the company’s ability to meet current payment obligations and plan for future payments, two essential aspects of maintaining business stability.

Treasurers and CFOs are typically the individuals at a company tasked with handling cash management. Fortunately for them, there are a variety of tools and products at their disposal to help manage the entire cash flow cycle. This is especially true during the current pandemic. More treasurers are turning to digital solutions to keep cash flows operating in a time of social distancing and work from home requirements.

The sheer amount of cash management tools and services available makes choosing the right option a potentially challenging, if not daunting, decision. To help companies navigate this crucial decision, Mercator Advisory Group is hosting a webinar titled “Matching Solutions with Client Needs in the Cash Cycle: Mind the Gap.”

During the webinar, Steve Murphy, Director of Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group, will discuss the challenges presented in the cash flow cycle and how Mercator can help companies find the right solutions to address them.

PaymentsJournal sat down Murphy to preview the upcoming webinar and learn more about cash flow management.

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The many components of the corporate cash cycle

Murphy began the discussion by broadly outlining the various terms and components that comprise the corporate cash cycle. Up first was working capital.

“Folks that have taken finance courses will be familiar with the term working capital, and you hear that utilized a lot these days,” said Murphy. “It’s basically short-term assets minus short-term liabilities.”

Assets can include cash on hand, inventory, and accounts receivables, which are unpaid bills owed to that company; liabilities include accounts payables, or the money that company owes to others. Keeping track of working capital is important because if a company’s liabilities exceed its assets, it can have trouble paying its creditors and potentially go bankrupt.

In essence, the basic components “of the cash cycle [are] the time and the money involved to buy inventory, to store, to sell it, and then to collect on invoices after you ship and it’s received,” explained Murphy. Put another way,